A note on the Fair Work Commission’s increase to the federal minimum wage
Bankwest Curtin Economics Centre considers the Fair Work Commission’s decision to increase the federal minimum wage from $20.33 per hour to $21.38 per hour in 2022 as an appropriate response to current cost of living pressures.
The decision amounts to a 5.2 per cent increase for minimum wage workers, which is marginally higher than the 5.1 per cent rate of inflation over the year to the March quarter, 2022.
Increasing the minimum wage by slightly more than the inflation rate is an acknowledgement that the current pattern of increases in consumer prices are likely to be hitting people on low incomes harder.
Rising prices in power, petrol and basic grocery items will affect lower income households more, because those items make up a larger proportion of their household budgets.
The decision is unlikely to add to inflationary pressure, since it is simply ensuring wages at the bottom end of the distribution catch up with the general price level; and with a national unemployment rate below 4 per cent, tight labour conditions would have been putting upward pressure on wages anyway.
The price rises we are seeing at the moment are due to external factors: wages are lagging behind, not leading prices.
Professor Mike Dockery
Principal Research Fellow
Bankwest Curtin Economics Centre